Colorado Gov. Jared Polis signed H.B. 19-1090 into law this past summer, heralding a new era of outside investment and ownership in one of the great legacy markets of the U.S. cannabis space. With the floodgates open to new capital, the rampant mergers and acquisitions (M&A) activity in the U.S. cannabis industry during at least the past year may now flow more easily into Colorado’s five-year-old adult-use marketplace. Among the bill’s provisions:
- Publicly traded corporations may now hold Colorado cannabis business licenses.
- Qualified private funds based elsewhere in the U.S. may now invest in Colorado cannabis businesses and hold more than 10% equity.
These provisions (and other rule-making formalities in the law) will go into effect Nov. 1. Since early June, following the signing of H.B. 19-1090, Medicine Man Technologies has announced acquisition terms for 12 cultivation facilities, seven infused product manufacturers, 33 retail dispensary locations and a research and development lab in Colorado—each contingent on the parameters of H.B. 19-1090. Medicine Man Technologies trades publicly on the OTC markets from which it draws out-of-state investment dollars to pursue those very acquisitions. With Polis’ signature, the company feels that the time to move is now.
“I’ve been working for about three and a half years to get that bill passed,” Medicine Man CEO Andy Williams tells Cannabis Business Times. “Colorado had laws on the books that dated back to the very beginning. Of course, we were the first recreational and medical market to be regulated in the country—and because of that, Colorado was under a microscope.” Williams says legislators put very tight restrictions on ownership and investment when Colorado first rolled out its cannabis system. While called for at the time, “those laws survived longer than they were needed. As states started coming online around the country and investment increased in the industry, that investment flowed around Colorado.”
"As states started coming online around the country and investment increased in the industry, that investment flowed around Colorado.” - Andy Williams, CEO, Medicine Man Technologies
The company’s announcements grew more frequent this summer due to its rampant acquisition spree in Colorado. Williams says this was always the plan.
The executive team laid out its growth plan in the company’s August 2015 S-1 prospectus: “Ultimately, our intent is to become a national or internationally branded cannabis company. … Among other things, the most important developments that need to occur include the legalization and commercialization of marijuana in the United States and a change in the regulatory standards being imposed by the State of Colorado. … Until these issues are resolved, we will be unable to fully integrate all aspects of the marijuana industry under our corporate umbrella.”
Williams says that the wave of incoming capital is helpful for those companies looking for a buyer or a partnership of some kind with out-of-state parties. Consolidation isn’t slowing down, but more than that he cites impending product innovation and technological efficiencies to come in federally licensed cannabis research. MedPharm Holdings, a Medicine Man Technologies subsidiary, has been “selected to move forward” by the Drug Enforcement Administration to assist in its research rule-making and licensing process.
“I believe that this market is certainly one of the most competitive in the U.S.,” Williams says, predicting that Colorado could become “the hub of headquarters of U.S.-based cannabis companies” in time.